It has been a very interesting week to say the least. Market analysts called for the buck to depreciate on the back of the squabble in Washington over the debt ceiling, but it did not. It did the exact opposite making gains as the show played out in DC. Then, once “the can was kicked down the road” a bit, the dollar tanked and made new lows against most majors.
This type of price action goes hand in hand with my fundamental view of economics. As I have mentioned earlier, a default would strengthen the buck while raising the debt ceiling would amount to Bloomberg’s punch line, “a softening of the dollar.” The US index does, however, have room to the downside without invalidating the bullish wave counts at minor degree. As for now though, the buck seems to be moving down.
Now, it is pretty much mainstream that QE is off for the year at least. Something I have known for a while now. As for the show in DC one has to only look at the result to see its reason. The Republicans lifting of the debt ceiling just for a bit underscored their lack of will. Why would they pull back now? This is a fight they should have never gotten in and now they are paying for it politically. If you just take a look at the only outcome that the debt ceiling fight has produced, you will see that it was the putting off of the tapering. After all the fighting its government as usual. The FED, though, was handed their excuse to keep their credits rolling. I thought that they were going to use the Syrian crises; and maybe they thought so too. However, this does seem to be a much better excuse–it being globally and domestically sounder. Just maybe this sudden dollar decline, is a sign that markets are now seeing that the FED is stuck in QE. Yet, I would still be cautious.
US stocks rallied during and after the compromise. After bouncing off the Oct 9th lows the S&P, Dow and the NAS all moved up to impulsively to new highs with the S&P hitting 1745, the Dow 15412 and the NAS 3863. All three closed on Friday just off the highs. The S&P made a new all time high, the NAS made a new 12 year high and the DOW’s high merely retraced 70.7% of its fall off its Sept 18th 15709 all time high. Count wise the indexes have some room to the upside and are now coming up against some very heavy Fibonacci resistance with the S&P between 1848-1791, the Dow between 16826-16236 and the NAS at 4673. Keep in mind that there are good counts that have stocks topping here a near levels. As for now, I am going with the more bullish counts always keeping in mind the possible turn south. However, until I get some support broken on the Weekly and Monthlies, I am looking for some more upward movement in the indexes.
The US Dollar Index has been a bit of a headache for the Technical Analysis world. I have seen both bullish and bearish calls from deferring methodologies. Even some respectable elliotticians have been at odds as to their counts. But once again, I am still bullish the Buck until some support is breached at intermediate degree. Short term, however, the buck fell through some support invalidating minute wave counts. However, structurally the buck has completed minimum requirements at some nice Fibonacci support along the Sept 16th/Jan 25th trendline support at 78.6. If this is breached then we could see the buck move down to the 78.60. From there, the Buck could very well slide down to the 75.14 the 78.6% retrace of the move up from the May 2nd low at 71.90. Counts on the Euro and Pound confirm the Dollar index at near reversal levels. Take note that the Euro made near term high at 1.3607 on Friday while the Pound failed to do so falling short of its Sept 30th 1.6260 high at 1.6225. Structurally the Pound looks weak. The move down from the Sept 30th high counts as a nice five wave move with corresponding motive waves at smaller degree while this move up pattern appears as a nice expanding flat that has topped at the 88.7% Fibonacci retracement of the impulsive like move down. The Yen looks like it has retraced its wave one of the move up from the triangle completion at Oct 7th low at 96.53. It too is sporting a similar structure as the Pound, however with its wave two expanding flat losing momentum at the 50% retracement of the move up. The Commodity block is also showing structures at turning points and heavy Fibonacci resistance with slowing momentum at the shorter fractals. The Aussie being the strongest this past week closed at .9674 with is smack in the middle of a nice harmonic zone. If the pair moves up nicely above the .9685 then more upwards movement might be expected. A good break below the 9657 would confirm the bearish counts I have the pair in. the Kiwi is up against some heavy Fibonacci resistance but is still short. It could move up to test before turning down. However, structurally it might just be turning down now. The CAD is failing to reveal itself. Both the moves up and down from the Sept 19 low are corrective like. Although the CAD looks weak on the bigger time frames this short term price action is in la la land. The pair is in some pretty thick support now and could go either way technically. It’s times like these where one has to be patient and let the pattern reveal itself. Being at critical levels, If the buck is to gain against the majors, Asia Monday should be the day to watch.
The US 10 year has been carving out a text book zigzag move for a wave 4. Wave one of C looks like it has completed at 2.57. The Yield should retrace a bit before heading down to the 2.46 previous 4th wave and the 2.38% wave C equality with wave A.
Gold and Silver have broken above the tunnel and trend line resistance this past week on the 4 hour. The moves ups are so far three waves, although, the up moves do look impulsive compared to the choppy downward retracements. Remember that the larger corrections at minute degree even though complete still have plenty of room to the upside for a more complex move. This apparent move up goes against my still bullish Dollar lean. If gold moves up, we could see more Dollar weakness. If the metals fail and make new lows it will confirm my bullish dollar counts.